The Distance and Borders on the Influence of Wage Differential in China

by Lin, Ya-ting

Abstract (Summary)

Due to there is no record of migration in China, we estimate migration by Johnson¡¦s (2003) way. Estimates of migration among the provinces of China area were made by comparison of the provincial population from the 1994 to the 2003 censuses. The estimates were made by comparing every year between 1995 and 2004 population of each province with what it would have been if population had increased solely due to national growth-the excess of births over deaths. Unfortunately, the estimate of the increase in provincial populations due to migration was much greater than the estimate of the loss of population by migration. Possible reasons for the difference in the estimates due primarily to the underestimation of immigrants. Because this difference amounts to less than 3% of the 1995-2004 population of China, the data is still useful to us.
Because wage is a kind of price, we adopt the method by Engel and Rogers (1996), and use the law of one price to examine the wage differential in China area. We find that high migration gap, long distance and the presence of coast all lead to an increase in wage differential in China area. We also find that distance and border reduce differential among provinces. Note that the distance has a positive effect on wage differential, and the square of distance has a negative effect. This means the distance relationship were concave.
Finally, we examine the tendency in the standard deviation of wage differential and migration gap among the provinces of China during the period 1994-2003. The standard deviation of wage differential widened, and the standard of migration gap did not display strong increasing or decreasing. Although the growth rate of wage differential was positive, it reduced in recent years. The average growth rate of migration gap was close to zero, there is not significant tendency.